Aging technology is a significant challenge in the financial services industry. Many institutions face increasing pressure to meet security obligations, high maintenance costs, enhance customer experiences, and remain competitive. However, legacy systems, with their technical challenges, make it difficult to be agile and innovative. Keep reading to explore the key challenges financial institutions face during modernization and learn best practices to ensure a successful transformation.
Overcoming 4 challenges in core systems transformation
Modernizing core systems, particularly through cloud migration, is essential for staying competitive, but financial institutions face several challenges that can hinder this transformation. Let’s explore these challenges and the strategies to overcome them.
- Culture shock and skills gap in cloud migration
- Challenge: Many organizations lack the in-house expertise for cloud migration, making the development of a clear migration roadmap challenging.
- Solution: Professional cloud services partners provide expert guidance, best practices, and technical expertise throughout the migration journey. They assist in assessing workloads, planning infrastructure architecture and sizing, and ensuring a smooth transition.
- Security concerns in cloud adoption
- Challenge: Security is a major obstacle for cloud adoption. There is a persistent perception that cloud environments are less secure.
- Solution: In reality, public cloud service providers invest heavily in security. For instance, Microsoft invests $1 billion annually in Azure cybersecurity, defending against 7 trillion cyber threats daily. Partnering with a reputable cloud services provider ensures robust security measures, continuous monitoring, and adherence to best practices, such as secure protocols, virtual private Networks and end-to-end encryption policies.
- Cloud provider lock-in risks
- Challenge: Organizations fear being locked into a specific cloud provider, which could limit future flexibility.
- Solution: Professional services providers offer unbiased guidance, helping organizations select the most suitable cloud provider, or develop a multi-cloud strategy that meets their business goals.
- Data sovereignty regulations
- Challenge: Data sovereignty regulations often hinder cloud adoption as companies and government departments worry about legal implications of moving data to the cloud.
- Solution: Often restrictions are less stringent than perceived. Seeking legal advice can clarify concerns and as cloud providers establish local data centers, these concerns are further mitigated.
Ensuring regulatory compliance and effective governance in core systems modernization
Beyond data sovereignty, regulatory compliance and governance play a crucial role in the modernization journey. Modernizing core systems in financial institutions involves more than just technological upgrades; it also requires adherence to stringent regulatory standards. Financial institutions must ensure that any new systems or processes comply with local and international regulations to avoid penalties and maintain trust with customers and stakeholders.
- Navigating complex regulations: As financial institutions modernize, they must address a range of regulatory requirements, including those related to data privacy, anti-money laundering (AML), and financial reporting. This process can be daunting, especially with evolving regulations that vary by region.
- Governance and risk management: Effective governance is crucial to ensuring that modernization efforts align with regulatory requirements. Financial institutions need robust frameworks for managing risks associated with data security, operational continuity, and compliance. This includes implementing controls and audits to monitor compliance continuously.
- The role of technology in compliance: Modern technologies, such as AI and machine learning, can enhance compliance efforts by automating the monitoring and reporting processes. For instance, AI-driven systems can analyze vast amounts of data to detect suspicious activities, helping institutions stay ahead of regulatory requirements.
- Collaboration with regulators: Engaging with regulators during the modernization process can help institutions anticipate and address compliance challenges early on. Open communication ensures that modernization efforts are aligned with regulatory expectations, reducing the risk of costly delays or rework.
With compliance and governance addressed, the next step is developing a comprehensive modernization strategy that aligns with your institution’s goals.
Developing an effective legacy systems modernization strategy
A successful transformation requires more than just overcoming challenges—it demands a well-defined strategy. This modernization strategy should encompass several key components:
- Assessment and planning: Start by assessing your current IT infrastructure, identifying critical systems, and understanding their dependencies. Develop a roadmap that outlines the steps needed to modernize these systems, whether through cloud migration, system upgrades, or re-engineering processes.
- Technology selection: Choose the right technologies and platforms that align with your long-term goals. Consider factors such as scalability, security, and compatibility with existing systems. Microsoft Azure, for instance, offers a robust platform tailored to the needs of financial institutions.
- Skills development: Invest in training and upskilling your IT staff to manage and maintain modernized systems effectively. Consider leveraging external expertise to fill in any knowledge gaps.
- Risk management: Identify potential risks associated with modernization, such as data breaches, compliance issues, or operational disruptions, and develop a risk management plan to mitigate these risks.
- Continuous improvement: Modernization is an ongoing process. Regularly review and update your strategy to adapt to new challenges, technologies, and regulatory changes.
With a robust strategy in place, financial institutions can maximize their modernization efforts by leveraging industry experts.
Enhancing success with industry expertise
By leveraging the expertise of a professional services provider with deep domain expertise, financial institutions can navigate the complexities of modernization and cloud migration more effectively and ensure a secure, scalable, and cost-efficient transformation.
Partnering with a reputable professional services firm offers several advantages:
- Expertise: Specialized knowledge ensures a well-defined migration strategy and setup of DevOps pipelines.
- Cost control: Costs are managed through optimized cloud usage; thereby, avoiding unnecessary expenses.
- Security assurance: Security hardening requirements are documented, and policies are implemented.
To illustrate the impact of expert guidance, let’s look at a recent success story involving a major financial institution.
A financial services cloud success story: optimizing banking operations with Microsoft Azure
Alithya recently partnered with a prominent bank to accelerate its digital initiatives, with goals that included improving client services, empowering employees, and reducing operational costs. Leveraging Azure, Alithya helped our client achieve significant technical and business outcomes, including:
- New capabilities: Enhanced customer and employee experiences through large-scale infrastructure and application migration and modernization.
- Loyalty and growth: Strengthened customer loyalty, contributing to overall growth.
- Efficiency improvements: Reduced time-to-value and costs while increasing agility, supported by a coherent cloud adoption and migration strategy.
- Data silo elimination: Provided greater access to actionable insights.
- Fraud defense: Strengthened defenses against fraud.
- Innovation acceleration: Facilitated sustainable growth through continuous innovation.
- Reduced costs: Optimized Azure resources to manage and reduce operational costs.
This transition from on-premises infrastructure to Azure’s centralized cloud space highlights why more financial institutions are turning to Microsoft Azure to support their modernization efforts.
Why do financial services institutions choose Microsoft Azure?
So, why are financial services institutions going with Microsoft Azure? Microsoft Azure provides customized features and solutions that directly address the unique business objectives of financial services institutions. Here’s how:
Digital transformation with Azure
Agility, speed, security, and scalability: Financial institutions leverage Azure to offer differentiated customer experiences, manage risks, and combat fraud. Azure’s robust platform supports the modernization of legacy systems, enabling streamlined operations and a focus on core business functions.
Architectures and solution ideas
- Decentralized trust between banks: Establish a trusted environment for information sharing without relying on a centralized database by leveraging innovative technologies like distributed ledger technology and blockchain.
- Replicate and sync mainframe data in Azure: Facilitate the digital transformation of traditional banking systems by replicating and syncing mainframe data to Azure.
- Modernize mainframe and midrange data: Implement an end-to-end modernization plan for mainframe and midrange data sources.
- Refactor IBM z/OS Mainframe Coupling Facility (CF) to Azure: Leverage Azure services for scale-out performance and high availability, comparable to IBM z/OS mainframe systems with Coupling Facilities (CFs).
- Migration patterns and implementations in banking cloud transformation: Explore design patterns and implementations used for banking system cloud transformation on Azure.
- Real-time fraud detection: Analyze data in real time to detect fraudulent transactions or other anomalous activities.
Efficiency and automation
Azure’s automation capabilities extend beyond server upgrades to include operational system upgrades. This reduces manual effort and increases efficiency, allowing financial institutions to focus on their core business functions.
Azure’s robust capabilities make it the platform of choice for forward-thinking financial institutions. But modernization is more than just choosing the right platform—it’s about taking the next step in your digital transformation journey.
Accelerate your digital transformation journey
Modernizing core systems is not just about upgrading technology, it’s about enhancing operations, maximizing margins, and reimagining processes. Alithya’s expertise combined with Azure’s capabilities empower financial institutions to thrive in an ever-evolving landscape. By embracing modernization, institutions can unlock greater business value and maintain their competitive edge.
Are you ready to embark on your digital transformation journey? Alithya is here to guide you every step of the way. Whether you’re a financial institution looking to modernize your systems or migrate to the cloud, our team of experts is committed to delivering results. Contact us today to learn more about our services and how we can help you achieve your business goals.